HISTORIC PRESS RELEASE : Enterprise for All – The Challenge for the Next Parliament [June 2001]

The press release issued by HM Treasury on 18 June 2001.

New measures to tackle the productivity gap with Britain’s major competitors were set out today by Chancellor Gordon Brown, Trade and Industry Secretary Patricia Hewitt, and Education and Skills Secretary Estelle Morris:

radical reform of the UK’s competition regime;
a Capital Gains Tax regime that is overall more favourable to enterprise than that of the USA;
modernisation of insolvency laws with abolition of Crown Preference;
better tax treatment for share options, extending Enterprise Management Incentives to larger companies;
a Green Paper, later this year, on reforming the planning system;
a review of the long-term retail savings industry led by Ron Sandler;
a major review of the role of enterprise and business in education led by Sir Howard Davies;
new measures to help small businesses grow including extension of the 10p corporation tax rate and help with VAT compliance;
a review of payroll services to small business;
an immediate review of DTI’s support to business, starting with industrial manufacturing;
targets for each of the English regional venture capital funds.

Speaking following a business breakfast held at No 11 Downing Street, the Chancellor said:

“Four years ago the Government began its mission to raise the economy’s sustainable rate of growth. In our first term this Government put stability in the macro-economy and work first. In our second term we must build on the platform of stability and employment. Today, we bring forward radical measures to tackle our productivity gap and create in Britain a true enterprise culture where the chance to start and succeed in business is genuinely open to all.”

Patricia Hewitt said:

“This Government will help UK firms get to the future first. Enterprise is key to our future prosperity. We must remove obstacles to innovation, and make competition work properly for the consumer, so that UK companies become the best at meeting consumer needs. We must back success and remove opportunities to break the rules.”

Estelle Morris said:

“It is vital for a healthy economy that young people understand the importance of enterprise and are given the support they need to succeed in their working lives. The Learning and Skills Council provides a very important link between the business community and young people. We are also making sure that schoolchildren get more chances to do work experience to help them prepare for the world of work. So I am pleased to announce today that, to encourage an enterprise culture, Sir Howard Davies has been commissioned to conduct a review of the role of enterprise and business in education.”

Today’s statement sets out a package of radical reforms to drive through improvements in the UK’s productivity performance.

These changes build on the reforms the Government made in its first term to improve competitive pressures in the economy, remove barriers to the effective operation of markets and ensure that our tax system properly incentivises enterprise and investment.

Measures include:

1. Reform of the competition regime. A White Paper will be published in July setting out proposals for early legislation:

modernising “complex monopoly” powers allowing the competition authorities independence to investigate sectoral markets under clear competition principles;
a strong legal basis for competition authorities to promote competition across the economy;
full independence backed by additional resources for the competition authorities; and
consultation on introduction of criminal penalties for those involved in cartels.

2. A new Capital Gains Tax regime that is overall more favourable to enterprise than that of the US. From April 2002 effective CGT rates for business assets will be reduced to 20 per cent after one year and 10 per cent after two and all subsequent years. The Government will also consider whether, during the lifetime of this Parliament, further changes to the non-business asset regime are necessary to improve incentives to invest and help businesses attract finance.

3. Major reforms to modernise UK insolvency laws to reduce the penalties for honest failure and to create a modern and fair commercial system. A White Paper in July will propose:

removing the Crown’s preferential right to recover unpaid taxes ahead of other creditors; and
ensuring collective procedures are used instead of administrative receivership, which allows just one creditor to have control. (Special arrangements will be considered for securitisation).

4. Improvements to the tax treatment of share options with a consultation on doubling the size of company that can qualify for Enterprise Management Incentives (EMI) to assets of £30 million.

5. Publication later this year of a Green Paper on Reform of the Planning System to set out proposals for significant improvements in the processes for determining planning applications, to ensure that the system strikes the right balance between economic and environmental considerations and is flexible and well-adapted for the diverse needs of the regions.

6. The appointment of Mr Ron Sandler, former CEO of Lloyd’s of London and Chief Operating Officer of Nat West, to conduct an independent review into the long-term retail savings industry including life-insurance. Working with the FSA, the review’s purpose will be to identify the competitive forces and incentives that drive the industries concerned, in particular in relation to their approaches to investment, and, where necessary, to suggest policy responses to ensure that consumers and the investment needs of the economy are well served.

7. A major review of the awareness of business, enterprise and the economy across schools and further education, led by Sir Howard Davies, chairman of the Financial Services Authority, to create a strong enterprise culture for the future. This will report to Gordon Brown, Estelle Morris and Patricia Hewitt in January 2002.

8. New measures to help small businesses start-up, grow and prosper:

The extension, in Budget 2002, of the 10 per cent corporation tax band to reduce the tax bills of more small businesses;
help for up to half a million businesses with the removal of automatic fines for late payment of VAT for firms with a turnover of less than £100,000. In future fines will only be levied after a written communication is first sent offering help and advice to sort out problems;
publication today of proposals for a flat rate VAT scheme which will mean hundreds of thousands of small companies paying less tax and facing lower compliance costs.

9. A review of payroll services for small firms, to make the system more effective and less costly. This will be led by Mr Patrick Carter, a member of the Public Services Productivity Panel. The review will focus on how payroll can be done more efficiently, with better support and use of technology. He has been asked to report by the end of September 2001.

10. A review of DTI’s business support, in consultation with stakeholders and customers. The review will start by examining support to industrial manufacturing, and its initial findings will be reported to the Secretary of State for Trade and Industry in September.

11. Announcement of progress on new Regional Venture Capital Funds for each English Region. Following the state-aids clearance the Government is announcing:

agreement in principle to invest up to £60 million by the European Investment Bank’s venture capital arm, the European Investment Fund;
seed funding by Government of up to £80 million;

indicative targets for each region:

£30 million for the North West

£20 million for the East of England

£30 million for the South East

£25 million for the South West

£25 million for Yorkshire and Humberside

£15 million for the North East

£20 million for the West Midlands

£20 million for the East Midlands

£50 million for London

12. As announced in Budget 2001, publication shortly of a consultation document to ensure that Britain has a corporate tax regime that helps create the best possible environment for long-term business investment, both in and from the UK.

13. A consultation paper “Radio Spectrum Management Review” published today by the Radiocommunications Agency is part of an independent review headed by Professor Martin Cave. The paper raises a number of areas for debate, including the best regulatory framework for the management of the spectrum; and pricing and auctions of the spectrum.